Correlation Between CEA Industries and Toyota Industries

Can any of the company-specific risk be diversified away by investing in both CEA Industries and Toyota Industries at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining CEA Industries and Toyota Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CEA Industries and Toyota Industries, you can compare the effects of market volatilities on CEA Industries and Toyota Industries and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in CEA Industries with a short position of Toyota Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of CEA Industries and Toyota Industries.

Diversification Opportunities for CEA Industries and Toyota Industries

0.07

Correlation Coefficient

CEA Industries  Toyota Industries

Significant diversification

The 3 months correlation between CEA and Toyota is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding CEA Industries and Toyota Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toyota Industries and CEA Industries is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on CEA Industries are associated (or correlated) with Toyota Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toyota Industries has no effect on the direction of CEA Industries i.e., CEA Industries and Toyota Industries go up and down completely randomly.

Pair Corralation between CEA Industries and Toyota Industries

Given the investment horizon of 90 days CEA Industries is expected to generate 3.54 times more return on investment than Toyota Industries. However, CEA Industries is 3.54 times more volatile than Toyota Industries. It trades about 0.22 of its potential returns per unit of risk. Toyota Industries is currently generating about -0.01 per unit of risk. If you would invest  652.00  in CEA Industries on September 17, 2024 and sell it today you would earn a total of  157.70  from holding CEA Industries or generate 24.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

CEA Industries  vs.  Toyota Industries

CEA Industries

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CEA Industries are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, CEA Industries exhibited solid returns over the last few months and may actually be approaching a breakup point.

Toyota Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Toyota Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, Toyota Industries is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with CEA Industries and Toyota Industries

The main advantage of trading using opposite CEA Industries and Toyota Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CEA Industries position performs unexpectedly, Toyota Industries can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Toyota Industries will offset losses from the drop in Toyota Industries' long position.

The idea behind CEA Industries and Toyota Industries pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.